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Power crunch threatens economic growth

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Power cuts across the country are threatening Zimbabwe’s economic growth, captains of the industry have warned.

Finance and Economic Development Minister, Mthuli Ncube projected a less than 4.6% economic growth this year.

This was a revision from an earlier forecast of 5.5% amid fears of economic headwinds.

Apart from severe power cuts, Zimbabwe has been grappling with foreign currency challenges, liquidity crunch, high inflation and runaway exchange rate.

“Rolling power cuts are the biggest threat to the 4.6% gross domestic product [GDP] projections as businesses have significantly cut operation hours and this is going to impact the industry’s capacity utilisation,” the Confederation of Zimbabwe Industries president Kurai Matsheza told Business Times this week.

He added: “We are at the peak period where there is huge demand and we are not producing enough.

“With rolling power cuts expected to continue into November, the damage could have been done to limit the economy to reach its projected growth as machinery depends on power to continue operating.”

He said the power cuts were not only affecting the industry but the whole economy as some raw materials suppliers could take time to supply due to the power crisis which has deepened.

The industry is reeling from rolling power cuts with some companies enduring prolonged unscheduled load shedding.

With power utility ZESA proposing an upward review of US$0.1221 per kilowatt hour (kWh) from the current US$0.0981 per kWh for electricity to be available, Matsheza said very few could take up that option as the businesses are already struggling.

“ZESA remains resolute on their upward review and this could mean we may need to find a long-lasting solution any time soon,” Matsheza said.

The Zimbabwe National Chamber of Commerce (ZNCC) president Mike Kamungeremu weighed in saying: “If a solution is not found soon the GDP growth projections are likely not going to be met as subdued growth means reduced output thereby affecting the overall economic performance.”

“Production is disrupted and there is a likelihood of serious implications to our projected growth,” he said.

Kamungeremu said this could also cause shortages.

Some companies are said to have cut their production capacity by 30% owing to crippling power outages.

Midlands-based economic analyst Trust Chikohora said power outages were a threat to the projected economic growth as there will be reduced productivity.

“Rolling power cuts are a threat to production and productivity so it’s important that they should be minimised and ensure that the industry gets power supply as quick as possible to reach the target and the envisaged growth,” Chikohora said.

As of yesterday, the ZESA power generation unit, Zimbabwe Power Company generated 1131MW   against a national demand of 2 500MW.

To cover for the gap, Zimbabwe imports electricity from South African power utility, Eskom, Mozambique’s Hydro Cahora Bassa and ZESCO of Zambia. However, Zimbabwe is not getting adequate imports as ZESA entered into non-firm contracts with the regional power utilities, meaning they can only supply electricity if they have a surplus.

Exacerbating the situation is that Eskom and other regional power utilities are also suffering from electricity insufficiency, making it difficult for them to supply Zimbabwe.

The agricultural sector is also feeling the heat as the wheat is reaching maturing stage and needs more water. With these power cuts, the historic wheat production figures are likely going to face a serious threat.

Now, the chronic shortages of electricity are starting to damage the economy. The costs vary from direct economic costs, indirect costs and social costs.

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